A surge in demand for land parcels due to increasing residential property sales has led to a rise in land prices by as much as 200% in some markets. Research from Anarock states that close to 87 deals were sealed last fiscal year across 1,862 acres, while last year saw 44 deals, accounting for 1,649 acres across various cities. Deals for land parcels today are getting closed within a week or so, a vast improvement from six to seven months earlier, according to consultants. Land prices have increased by 20% to 200% in tier 1 cities compared to the pre-pandemic period, with Gurugram and Hyderabad experiencing the highest increase of over 200%. Despite the shorter time needed to develop the final product, approval processes continue to lengthen the time it takes to enter the market. However, municipal corporation development plan approvals and RERA registrations now take less time, enabling a quicker go-to-market milestone. The activity in the land market is closely correlated with the strength of consumer demand and pricing prospects for the product, according to Vivek Rathi, director of research at Knight Frank India. What is crucial in terms of a land parcel under consideration is not only the availability but other important considerations of a clear title, free of encroachment or tenancy, etc.
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With residential properties selling in big numbers, the demand for land parcels has shot up, sending prices up by as much as 200% in some markets. Such a rush, say experts, has been seen only for the second time in the last couple of decades.
Research from Anarock shows that close to 87 deals were sealed last fiscal across 1,862 acres. In contrast, FY22 saw 44 deals, accounting for about 1,649 acres across various cities.
Deals for land parcels today are getting closed within a week or so as compared to six to seven months earlier, consultants involved in these transactions, said.
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Mayank Saksena, MD (land services), Anarock Property Consultants, observed that while pre-pandemic, builders were in no hurry to buy land, today, land deals were getting closed within a week.
“Every good deal has a handful of serious buyers who know there is not much time. The waiting period involving technical due diligence, negotiations, comfort between the parties and so on is about a week “Saksena said.
Abhishek Kapoor, CEO of Bengaluru-based Puravanakara pointed out that at the end of the day, it is about replacing the land inventory. “Since sales have gone up, especially for the organised players, far quicker replenishment of land inventory is bound to happen,” Kapoor said.
Anuj Puri, chairman, Anarock Property Consultants, noted that with land becoming scarcer amid a real estate development boom, leading players are pulling out all stops to secure the best land parcels in key locations.
While the number of land deals rose significantly last year, in terms of area, the increase was just 13%, implying that several smaller plots were sold. According to Puri, with land being the key input for real estate development, builders have been making strategic land investments across prominent micro-markets and quite a few smaller deals took place.
Residential sales in the top 7 cities scaled an all-time high in FY23 at about 380,000 units and large and listed developers have been cashing in on the unrelenting housing boom. The total units sold in FY22 were 263,708, much higher than the 148,866 units in FY21.
Land prices have shot up between 20% and 200% in tier 1 cities, compared to the pre-pandemic period, Dolat Capital said earlier this year. Gurugram and Hyderabad have registered the highest increase of over 200%, the report said.
Consultants said the time taken to develop the final product has come down to six to seven months from one-and-a-half years earlier due to smooth processes and systems.
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Puravankara’s Kapoor said, however, that in many markets, it takes much longer time to get approvals. “While on a broad level, this may be correct, our personal experience is that it is still taking time in some markets. Speed to market is dependent on sanctions, in our experience, this is taking anywhere between 8-12 months even today. It has reduced possibly from 1.5 years to under 12 months, but we are not seeing it at 6-7 months for sure,” Kapoor said.
Dhaval Ajmera, diector, Ajmera Realty & Infra India, said that land deals have now become a fairly structured transaction where the landlord and the buyer or the developer decide on the option they want to take. “Since the options have become narrower, it is easier for the land transaction to happen. Hence, transactions happen fairly quicker as compared to the past,” Ajmera said.
Ajmera said approval processes have become fairly streamlined. “However, the overall process still takes its time. It would take about a year to a year-and-a-half, depending on the nature of approvals to be sought,” he said.
Vivek Rathi, director – research, Knight Frank India, said that the activity in the land market is closely correlated to the strength of consumer demand and pricing prospects for the product.”Typically, the determinant is the residential product segment where land use is not restricted. Currently, the consumer sentiment towards real estate remains buoyant and this also enables moderate price rises in end product prices. Such an expectation provides a good downside protection to developers who are considering purchase of land parcels for development,” Rathi said.
The municipal corporation development plan approvals and RERA registrations now take less time, thereby enabling a quicker go to market milestone, Rathi said. “What is crucial in terms of a land parcel under consideration is not just the availability but other important considerations of clear title, free of encroachment or tenancy, etc. Land parcels with these parameters in place are witnessing healthy demand,” Rathi said.